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The Bean Counter

How one maddeningly particular chef transformed the lowly burrito into a global business juggernaut

Author CRISTINA ROUVALIS Photography Christopher Lane

FOR STEVE ELLS, no detail is too small. The fluff of a tortilla. The fineness of diced onion … The air conditioning in his chauffeur-driven SUV. The same scene unfolds every time Ells, the founder of burrito chain Chipotle, is picked up at the airport. After he sinks into the back seat, he asks the driver to adjust the temperature and flow — higher or perhaps a little to the left — until the air hits him just so. “He makes the driver crazy, absolutely crazy,” says Ells’ co-CEO Monty Moran. “But Steve is a walking barometer. He senses things more than other people, even more than he cares to.”

Over the past 18 years, Ells’ heightened senses have recast the burrito from gloppy Tex-Mex staple into what the chain touts as “a handcrafted, local-farm-supporting, food-culture-changing cylinder of deliciousness.” In the process, he has grown Chipotle to an 1,100-store, $1.84 billion chain on pace to open about 135 new locations this year. It’s the second-fastest-growing restaurant chain in the country based on customer traffic (behind Five Guys Burgers and Fries), according to the NPD Group, a market research firm. And while many restaurants are struggling to shake off the recessionary blues, Chipotle has posted double-digit same-store sales increases during the past three quarters. At present, it’s exporting its assembly-line-style kitchens and gourmet burritos abroad, with a second store opening in London and its first in Paris.

What’s more, Ells was one of the celebrity chefs judging the NBC reality show “America’s Next Great Restaurant,” though, unlike every other person who’s ever jumped at the chance to be on reality TV, he’s coldly dismissive of his newfound stardom. “Do you watch reality TV?” he asks sardonically when the subject arises. He might as well be asking if you eat processed cheese.

Ells started out as a line cook at Stars, a lauded fine dining restaurant in San Francisco, after graduating with a degree in art history from the University of Colorado in Boulder and then from the Culinary Institute of America. Living in San Francisco, he began sampling the wares of Mission District taquerias. The lines were long, and the food was inexpensive and delicious. That’s where the idea hit him to open a burrito joint with a foodie twist: cilantro-lime rice and grilled meat marinated with chipotle chiles.

His father gave him $85,000 — part loan and part investment — to open the first Chipotle in Denver in 1993. The restaurant was such a success that he opened a second one. And a third. In 1998, when Chipotle was just a 12-store chain, Ells formed an unlikely partnership with McDonald’s, which invested $360 million in his young venture. Flush with fresh capital, Chipotle took off, growing to about 500 stores. People gave the fresh-ingredient evangelist flack for uniting with the fast food giant, but Ells once again didn’t listen. “Who else is going to give you $360 million over a seven-year period and still let you run the business?” he says.

When Chipotle went public in 2006, McDonald’s sold its majority stake. “At the end of the day, we ran very different businesses,” says Ells. Though the companies parted, one McDonald’s executive, Jack Hartung, was so impressed that he jumped ship to become Chipotle’s chief financial officer. His boss at the Golden Arches was taken aback, but Hartung had never seen a businessman like Ells. “He was fanatical about the food. He didn’t mention profit margin. He is particular beyond reason sometimes,” the CFO says, citing how Ells would personally inspect the caulking between the plywood and corrugated metal at his restaurants to ensure it met his exacting standards.

Ells’ fastidiousness extended to ingredients, as well. After visiting Niman Ranch, a California-based purveyor of “all-natural” meats, 12 years ago, he declared that Chipotle carnitas would henceforth be made from humanely raised pork. The pigs tasted better when they were free to exercise in the sun and were fed a vegetarian diet free of hormones and antibiotics, he says. This year, Chipotle expects to use 100 million pounds of naturally raised meat and 10 million pounds of produce from local farms.

Now Ells is applying his perfectionism to a prototype called ShopHouse Southeast Asian Kitchen, expected to open in D.C. this fall. The chain is hush-hush about the new concept, except to say it is inspired by family-run restaurants in Thailand, Malaysia and Vietnam. Diners will be able to customize a meal from rice and noodles, grilled and braised meats, fresh vegetables, herbs, spicy sauces and garnishes.

Of course, history is littered with brand extension fiascoes (Harley-Davidson wine coolers, Bic underwear). As Jack Trout, a marketing strategist based in Greenwich, Conn., puts it, “It’s a long way from Mexico to Thailand.” But Ells says he knows food, not just Mexican food, and besides, he’s grown rich ignoring the conventional wisdom. When he launched Chipotle, “They said people didn’t want to see raw meat on the grill. They said people didn’t want to see the back of the kitchen. They thought the price points were too high. They said the décor was too industrial,” Ells says. “The naysayers were wrong.”

CRISTINA ROUVALIS, a writer in Pittsburgh, would like hers with extra guacamole, please.

 

FOOD FIGHT

The burrito craze of recent years has propelled not just Chipotle to soaring heights, but other chains as well. Moe’s Southwest Grill stands at 430 locations, more than doubled from five years ago, and Qdoba added 262 stores between 2007 and 2010. Here’s how the big four stack up.

CHIPOTLE 1,100+ stores

QDOBA 550 stores

MOE’S SOUTHWEST GRILL 430 stores

BAJA FRESH MEXICAN GRILL 255 stores

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